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In a dramatic reshuffle, Saudi Arabia replaced its energy minister, setting up the king's son and ousting Khalid al-Falih.
Prince Abdulaziz bin Salman will assume in the Ministry of Energy the son of the king and the half-brother of the powerful Crown Prince. He will be the first member of the family to lead the powerful ministry.
Prince Abdulaziz bin Salman is not only a loyal family. He has been Deputy Minister of Petroleum for more than a decade and has a long history of working with OPEC. He has negotiated and negotiated agreements with other member countries, including Iran, his rival. As Bloomberg has reported, he recently led negotiations on restarting the neutral zone oilfields located on the border between Kuwait and Saudi Arabia.
For the moment, there is no sign of any noticeable change in politics. Oil prices rose on the news. "The new Energy Minister should continue the policy of his predecessor, namely to maintain the tight oil supply," wrote Commerzbank in a note.
For his part, Prince Abdulaziz bin Salman also insisted on continuity. "There is nothing radical in Saudi Arabia, we are all working for the government, a person is coming, a person is leaving," he said at a major conference on the country. energy in Abu Dhabi. "Saudi Arabia's energy policy is fundamentally based on a few pillars. The pillars do not change. "
Other analysts have agreed. "I do not expect a policy change – the goal is to provide higher prices and the IPO of Aramco," said Amrita Sen, co-founder of Energy Aspects, to Reuters.
At the same time, if nothing changes, this raises some questions about the need to recruit new staff. Reports in the press suggest that some members of the Saudi government have been disappointed with al-Falih's mandate. "[Mr Falih] is a victim of the underperformance of a portfolio too large and that people have the feeling that he was becoming too arrogant and arrogant, "said a source close to the government at the Financial Times.
The staff reshuffle also comes a week after King Salman separated Aramco from the Ministry of Energy. This leaves the new energy minister with a smaller wallet than al-Falih. Related: The production of this area says a lot about the oil potential of Kurdistan
"This appointment is very important for what it signals for the balance of power within the royal family – or its imbalance," Wall Street Journal quoted Robin Mills, chief executive of Qamar Energy, as saying. to Dubai. "This is part of MBS trying to impose its control."
According to the WSJ, it is in this context that the elimination of al-Falih should be considered. Riyadh is at a crucial moment. While oil prices are stagnating at around $ 60 per barrel, despite significant cuts in production, the Saudi economy and budget are under permanent pressure. Lower production and lower prices are a double blow.
The realization of Al-Falih was the creation of OPEC +, which brought a group of non-OPEC members to participate in the management of the market. The Saudi-Russian alliance in particular has characterized Al-Falih's past as the head of the Saudi Ministry of Energy. Getting Moscow with production cuts has reduced the overabundance of global supply.
However, close relations between Saudi Arabia and Russia seem to have supplanted OPEC in terms of decision-making, irritating many members of the oil cartel. In addition, the OPEC + agreement, though it has managed to reduce the impact of the overabundance of supply, has not allowed a sustainable price increase. As the Saudi government worries more and more about the budget pressure and the MbS is eager to advance the IPO system and other economic reforms, the persistent weakness of oil price could become a topic of contention with al-Falih.
On the other hand, Saudi Aramco's IPO is one of the top priorities. The decision to place a member of the royal family at the top of the Ministry of Energy is probably an attempt to strengthen the control and alignment of policies on some major policy decisions.
While Al-Falih publicly supported Aramco's IPO, it has also been striving to delay it and reduce the size of the offer, sources told the WSJ. With a member of the Royal Family now at the top of the Ministry of Energy, Crown Prince Mohammed bin Salman will have virtually an uncontrolled influence over the Ministry of Energy and Saudi oil policy.
And, of course, the IPO will need higher oil prices for it to be considered a success. This may help explain a slightly bullish market reaction to staff restructuring.
By Nick Cunningham from Oilprice.com
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